In this frenetic
world of ours, we spend most of our time trapped under the tyranny
of the present. The urgent preempts the important and life is a mad
dash from one activity to the next with little opportunity for
reflection. But in this season when one year is yielding to the
next, all of a sudden the past and future return to focus.

When year-end and
a new year force us to briefly emerge from the haze of the present
to survey the big picture, a precious opportunity arises. When we
briefly regain strategic perspective over our lives, we are blessed
with a chance to ponder our past and steer towards the most
desirable future. This impetus is very strong in the realm of
finance and portfolio design.

Often the busiest
months of the financial-market year are December and January. As
the urgency of the present temporarily fades and the past and future
return to focus, many important investment decisions are made. As
you consider your own investment portfolio and whether it is prudent
to add or remove positions, I urge you to consider gold.

Gold belongs in
every investment portfolio, regardless of an investor’s age,
goals, and risk tolerance. It is an anchor of indisputable,
timeless, and universal intrinsic value in a dangerous financial
world where any paper-asset prices can plummet overnight. If you
don’t own gold, or your gold position is too small relative to your
portfolio size, then you are not truly diversified and you are
accepting much more overall risk than you need to.

I’ve been a gold
investor for many years now, and have ridden our current gold bull
in my own investments and speculations since it launched. On the
very trading day before gold carved its multi-decade secular bottom
in early April 2001 I concluded
an essay with,
“History, economic fundamentals, and logic dictate gold is amazingly
undervalued and due for a monstrous rally. My capital will be ready
for the coming gold rush!”

The next day gold
briefly fell under $257 but it has never looked back since. As of
this past May’s $720 high, since 2001 gold’s bull has climbed about
182%, really an incredible gain for the safest and most enduring
asset in world history. So hundreds of
weeks of research
and thousands of percents of realized gains later, I am not a
newcomer to this gold bull. But I do still meet many folks who are
just starting looking into gold as an investment.

It is for these
investors kicking the tires of gold that I am penning this essay.
The most common questions I hear from these folks are usually
variations of the following… Why is gold in a bull market? When
will its bull market end? Am I too late to buy gold since it has
already risen so far? What are the core fundamental drivers of this
gold bull? Will central banks cap the gold price and therefore
crush the gold investors?

After endless
studies considering these very questions, my own personal worldview
for gold still remains very bullish for the long term. Despite how
far we have come I still believe we are in the midst of a massive
secular (long-term) gold bull that will likely run higher for
another decade or so. There will be periodic corrections of
course just as in any bull, but on balance gold seems destined to
rise for many years to come yet.

To attempt to
address some of these key questions for newer gold investors as well
as explore the gold fundamentals that make it so bullish, I’ve
broken down the rationale behind this secular-gold-bull thesis into
ten broad-overview reasons. If you carefully ponder and digest
these, you will understand why gold’s fundamentals are so bullish
and why every investor’s portfolio should have material gold
exposure.

1. Supply and
Demand.
The ultimate arbiter of any price is supply and demand. When demand
exceeds supply, prices are forced to rise. These rising
prices work to address a chronic deficit simultaneously from both
sides, providing an incentive for producers to increase
production while also providing a parallel incentive for consumers
to decrease consumption. Eventually the rising prices bring
supply and demand back into equilibrium where production and
consumption are balanced.

In gold’s case,
its global investment demand is growing much faster than its global
mined supply, so the only possible economic resolution for this
deficit is higher prices to bring supply and demand back into
balance. I’ll discuss the reasons why gold’s demand is rising
below, so for now let’s focus on why its mined supply simply
cannot rise fast enough to meet demand growth.

Unlike almost
every other business, gold mining is totally dependent on highly
local geology. Obviously you can’t build a gold mine unless there
is gold to mine! Since gold is so scarce in the natural world, it
is very difficult to find a site with enough gold to mine
economically. And even if you manage to find such a site after
endless exploration, you are totally at the mercy of local and
national governments, all of which are corrupt and love to extort
profits from captive mining ventures. Since mines cannot be moved,
governments prey on them.

And if you manage
to find a suitable gold deposit and can somehow jump through all the
flaming bureaucratic hoops, you still have to raise tens or hundreds
of millions of dollars to build roads, erect buildings and
infrastructure, sink the shaft or pit, and buy the necessary heavy
equipment. And even if you beat the odds and manage to secure
financing, it still takes several years at best to spin
operations up to full speed.

So not only is
gold mining an extremely tough business plagued with geological
quirks and government harassment and enormous up-front capital
costs, but even if you can overcome all of these stellar hurdles you
won’t be selling any of your gold for years. Thus, no matter how
high the gold price travels, it will still literally take years
for producers to find new deposits to develop, mine, and sell.
There are no shortcuts in this industry.

Global gold mined
supply is therefore very inelastic (unresponsive to price)
and highly constrained over anything short of a half decade or so.
Today’s higher gold prices will take at least several years
for producers to respond to, but only after these producers
believe that this bull will be persistent enough to make a big bet
on it. Thus the rate of mined gold supply growth cannot and will
not grow very fast in the coming years.

2. Long Valuation
Waves.
The general stock markets move in great 33-year cycles known as
Long Valuation
Waves. For the first half of these cycles, like from 1982 to
2000, stock valuations and prices rise in massive bull markets. But
in the second half, like from 1966 to 1982 or 2000 to 2016, stock
valuations relentlessly
mean revert
back down below long-term averages. We are in this brutal valuation
wave winter today.

Although stocks
make horrible long-term investments during the latter half of these
Long Valuation Waves, thankfully commodities and hard assets
thrive. Commodities also move in roughly one-third-of-a-century
cycles over time, but they tend to oscillate 180 degrees out of
phase to the equity valuation waves. Thus, secular commodities tops
like in the early 1980s coincide with secular equity bottoms. And
secular equity tops, like in 2000, coincide with secular commodities
bottoms.

Our current
Great Commodities
Bull launched in
2001, just
after the secular top in the general stock markets capping a mighty
equity bull lasting for half of a 33-year valuation cycle. Market
history is very emphatic in demonstrating that the 17 years after
this parallel commodities bottom and equities top should be great
for commodities but very poor for equities. Since we are now about
7 years into this usually 17-year trend, this precedent suggests
commodities should be strong and equities weak for another decade
or so yet.

And indeed on the
supply side commodities capital investment was neglected for two
decades prior to 2001 so global production remains relatively low
while world demand for commodities is skyrocketing, particularly out
of rapidly-industrializing Asia. Just as with gold specifically,
for commodities in general constrained supply growth accompanied by
accelerating global demand guarantees higher prices.

So why languish in
a secular stock bear when your investments can thrive in a
secular
commodities bull? As more and more investors come to realize
this, their demand for gold and other commodities-related vehicles
will only grow greater and greater. We may as well bet on the horse
most likely to win in the next decade!

3. King of
Commodities Investments.
Out of all the ways to invest in a Great Commodities Bull, gold is
the single easiest and safest. Physical gold is
easy to buy,
requires no upkeep, and a great deal of wealth can be secured and
stored in a relatively trivial volume. Unlike many other major
commodities, physical gold is not perishable and can be stored
indefinitely. Gold has always been the ultimate commodities
investment.

For pure
investment purposes, every other commodity falls short of gold. You
can easily hide $1m in gold coins in an old unused pipe section in
your house and no thief would find it in a thousand years. If you
buy $1m in wheat though, you will have to purchase land and bins to
store it, and insects and humidity could destroy it in less than a
year if it isn’t stored perfectly. Oil may be the king of
commodities in general, but try to get zoning permission to build a
giant tank to store $1m worth of crude oil in your backyard!

Silver is
ultra-volatile and one of the greatest speculations in history, but
it is inferior to gold as a store of wealth. In addition to its
brutal gut-checking
price volatility,
its value-to-volume ratio is vastly lower than gold’s. $1m worth of
silver weighs far more and takes up a great deal more room than $1m
in gold. For investors wanting to deploy capital directly into this
secular commodities bull, gold is the most logical choice today just
as it always has been.

4. Ultimate
Alternative Investment.
Some investors will buy gold to ride the commodities bull, while
others will buy gold to escape the equities bear. This distinction
may seem subtle, but it is very important. Gold is a natural
destination for equity flight capital since it is the ultimate
alternative investment in world history.

Mainstream
financial investments are virtually all intangible paper. All of
the stocks and bonds we own, even all of our bank accounts, are
ultimately nothing more than someone else’s promises to pay.
If these promises are not honored, then the stocks and bonds are
worth no more than the paper on which they are printed. During the
descending half of Long Valuation Waves, after enough years of
punishment, investors’ confidence in paper assets wanes. Remember
the 1970s?

Gold is the
ultimate alternative investment because it is tangible. It is a
real physical asset that has intrinsic value in and of
itself, never dependent on someone else’s mere promises to pay.
Since gold is fully independent from the paper financial system and
its underlying fragile web of promises, it has long been perceived
as the most ideal safe haven when investors flee paper.

Unlike paper
investments which have brittle foundations of faith alone in some
relatively new and fragile institutions, gold’s real purchasing
power has remained strong for over six millennia. Gold has
outlasted every currency, investment, and government that has ever
existed. No other investment, alternative or mainstream, has even
come close to transcending the ravages of time like gold has. Gold
also transcends political boundaries, it is universally valued
everywhere on the planet.

Interestingly, as
equity flight capital bids up gold prices in the years ahead it will
create a virtuous circle that attracts in even more capital. Gold,
like all investments, becomes more attractive to more people the
higher it goes. This is contrary to normal supply-and-demand
profiles, where demand becomes lower at higher prices. In gold’s
case, investors bidding up its price end up putting it on the radars
of even more investors, who bid it up farther and accelerate this
bullish cycle.

5. Relentless
Fiat Currency Inflation.
Speaking of paper, every national currency on the planet today is
pure fiat, just paper monopoly-money backed by nothing but faith
in the issuing government. Since today’s monetary supplies have no
roots in reality, governments can and do grow money supplies much
faster than the underlying pools of goods and services on which to
spend money. The US dollar has not been backed by gold since 1971.

When money
supplies grow faster than underlying economies, soon relatively more
money is bidding on relatively fewer goods and services. This
monetary competition drives up general prices. This increase in
money supply is, of course, the
scourge of
inflation. Inflation is a diabolical and immoral stealth tax
imposed by governments on their unsuspecting populaces. People work
hard for a lifetime saving money, but when they retire they sadly
find that their money will buy a lot less than it did back when they
were saving.

As more and more
investors perceive the dire threat of systemic inflation to their
families’ futures, they will naturally migrate into gold. Gold
keeps pace with inflation, buying roughly the same amount of real
goods and services regardless of currency in circulation. In
the 1920s one ounce of gold would buy a good men’s business suit at
$20. Today this same ounce of gold at $625 will still buy
the same grade of suit, but the original $20 in paper won’t even buy
lunch! Fiat paper currencies are virtually always a terrible
long-term investment.

While paper money
supplies tend to perpetually grow by 7% to 9% annually in the First
World thanks to irresponsible and unaccountable central bankers, the
newly mined physical gold supply rarely exceeds 1% a year in
growth. This stable and naturally-limited very low growth rate is
why gold has been the ultimate form of money for six thousand years
now. With fiat currency growth rates far exceeding the gold supply
growth rate, it is inevitable that relatively more paper will
chase relatively less gold, bidding up its nominal price.

6. Negative Real
Rates.
A key corollary to fiat inflation is today’s brutally low or
negative real rate environments, where bond investors either break
even or actually lose purchasing power by the mere act of
lending out their hard-earned capital. When the rate of underlying
true monetary inflation exceeds the nominal interest rates available
in the markets, bond investing becomes a losing proposition.

Now please realize
I am talking about the true inflation rate here, which is the
growth rate in broad money supplies, not the watered-down
government-reported inflation numbers. The government aggressively
lowballs the CPI by choosing to exclude items rising in price and by
using hedonic statistical wizardry. The lower the reported CPI
growth, the lower the growth in the government’s non-discretionary
inflation-indexed welfare-like payments which leaves more
discretionary funds for politicians to spend on their pet projects.

Free markets hinge
on the crucial concept of mutually beneficial transactions.
The bond markets are where savers, who consume less than they earn,
meet up with debtors, who earn less than they consume, to consummate
capital transactions. True free-market prices for this money, or
interest rates, provide a reasonable return to the saver and a
reasonable cost to the debtor, a mutually beneficial
transaction. Interest rates should always be set by the free
markets instead of the unconstitutional abomination known as the
Fed.

But with today’s
artificially low interest rates, it is nearly impossible for bond
investors, savers, to get a fair return on their capital. If they
can only earn 5% on their capital but true monetary inflation is
running 8%, then they actually lose 3% of their purchasing power
every year. They are punished for being savers, something
central bankers absolutely revel in for reasons that escape me. It
is saving that should be encouraged and debt that should be punished
if a nation truly wants to experience great prosperity and wealth!

As such, when
central banks artificially manipulate interest rates too low, bond
investors gradually pull out of the rigged market. Since they can’t
beat inflation in bonds, they gradually migrate into gold so they
can at least maintain their purchasing power.
Negative real
rate environments are one of the most bullish scenarios
imaginable for gold investment demand, since they drive capital out
of bonds and into gold.

The Long Valuation
Wave winter will drive exasperated equity investors into gold, but
the unfair and artificially gutted interest rates will drive fed-up
bond investors into gold. It is foolish to allow a central bank to
force savers to subsidize wanton debtors. The savers may as well
just buy gold to ride out the inflationary storm and say to heck
with the debtors trying to rob them blind.

7. Investors
Trump Central Banks.
One of the most unfortunate attributes of gold investors as a whole
is our incessant and illogical paranoia regarding central banks. I
am amazed how many new gold investors write me after getting nearly
scared off by something they read on the Web regarding central bank
gold sales. The truth is central banks are nothing more than fellow
gold traders, they cannot control the gold market, and any anti-gold
schemes they hatch will ultimately lead to a bigger and stronger
gold bull.

Of the roughly
150k metric tonnes of gold thought to have been mined in all of
world history, today central banks only control about 20%, 30k
tonnes. Since central banks rightfully consider gold to be a threat
to their dishonest fiat-currency regimes, investors sometimes fear
central bank intervention in gold. Not surprisingly though since
they are run by bureaucrats, central banks are probably the worst
institutional gold traders on the planet.

One of the most
foolproof indicators that a secular gold bear is ending or a secular
gold bull is getting underway is central bank sales. Like the
Bank of England’s
2001 fiasco of dumping gold at a multi-decade bottom, for some
reason central banks tend to sell at exactly the wrong time.
Central bankers, amazingly enough, are human too and subject to the
same greed and fear as all traders. It is only at the end of long
demoralizing bears when they start believing the Keynesian
propaganda claiming that gold is a barbaric relic and think about
selling.

And when they do
sell, their gold sales are always very temporary in impact. The
only way to control a global price is to put a gun to the
head of every single buyer and seller on the planet of that
particular commodity. 120k tonnes of gold, or 80% of world
supplies, are not controlled by the central bankers. We
investors buying and selling this vast majority of non-official gold
ultimately determine world prices through our own supply and
demand. The central bank tail can’t wag the bull for long!

Betting against
central banks on gold is a great contrarian play. In the early
2000s they were selling aggressively and remember what happened?
Did gold plummet from $255 to $200? Nope! Instead it soared from
$255 to $720 despite the sometimes aggressive central bank
liquidations. Expecting central banks to seriously hinder a secular
move is like expecting a bureaucracy to be efficient, a fool’s bet.
They are all talk with very little if any direct long-term
influence on gold prices.

And just as
central banks tend to sell at the bottoms, they tend to buy near the
tops. We are already seeing more central bank buying and less
selling of gold at this young stage in our gold bull, and these
trends will only accelerate with the gold price. Thus the same
central banks that sold gold in the early 2000s will be buying it
back in the coming years at much higher prices, ultimately driving
this bull higher than it could have gone without them.

Why would central banks buy back gold? Around the world they are
diversifying out of the
falling US dollar,
which makes up the lion’s share of their reserve holdings, and
buying gold. In addition they find gold more attractive when its
price is rising just like all investors. By the time this bull is
on its last legs a decade from now, I would not be surprised if
central banks in aggregate hold much more gold than they did in
early 2001 when this bull began. Ultimately central bank buying is
going to really help gold.

Central banks have
always been involved in the gold markets and always will be. They
are merely traders just like the rest of us. It is totally
irrational for gold investors to fear central banks. We investors,
holding 80% of the world’s gold, have always controlled the balance
of power and we always will. Rising global investment demand will
easily overpower central bank selling anytime, as we have witnessed
abundantly in recent years.

8. Free Market in
Information.
For all of history until 1995, large organizations like governments
had a vast advantage over individual investors when it came to
information. But since the World Wide Web started growing popular
outside of academia in the mid-1990s, the inherent information
asymmetry working against individuals has vanished. Today a cheap
computer and broadband grants you information-gathering capabilities
vastly superior to even those commanded by superpowers as recently
as fifteen years ago.

Gold is the
ultimate free-market asset and currency and thrives in eras when
information flows the most freely. Today’s Information Age is
witnessing the greatest free-flow of information in all of world
history, far beyond the wildest expectations of empires past.
Thanks to the ease of learning about anything instantly from the
comfort of your own home today, governments can only pull the wool
over the eyes of their citizens who willingly choose to
remain ignorant.

Today investors
around the world can easily learn about monetary history,
stock-market history, gold, the immoral stealth tax of inflation,
and countless other crucial core topics essential to long-term
wealth building. Thanks to the Internet governments no longer have
a monopoly on financial truth. Investing in gold is the inevitable
outcome of learning more about the treacherous history of markets
and money, not to mention governments. The deeper you understand
these topics, the more you will respect and want to own gold.

The dazzling
Information Age is also facilitating the rebirth of private
100% gold-backed currencies, this time in the form of
digital gold.
Why store your transactional money in the form of rapidly inflating
government fiat paper when it could be stored in digital gold and
hence never losing purchasing power? As gold-backed digital
currencies gain popularity, demand for physical gold to back them
will continue to grow.

9. The Rise of
Asia.
With China destined to become the next superpower while the West
wanes, the locus of global economic might is shifting to the Far
East. Unlike Western cultures like us Americans who are brainwashed
into thinking of gold as a barbaric relic, inferior to paper assets,
Asian cultures still have strong affinities for physical gold. A
great example is Indian families storing extra income from harvest
each year in the form of intricate gold jewelry.

As Asian investors
grow wealthier, their traditional love for gold will ultimately lead
to huge amounts of capital shunted into physical gold as they
diversify their investments. Asia’s hard-working ethic will lead to
greater general affluence, and its aggregate gold investment
consumption will utterly dwarf that of the West. While an average
(read non-contrarian) American investor may have less than 1%
exposure to gold, an average Asian may want 10% or even 20%+ of his
portfolio invested in physical gold.

Even if the
average Asian remains poorer than the average American in an
absolute sense for decades to come, the combined effect of many
hundreds of millions of newly-liquid Asian investors buying
small amounts of physical gold could be staggering. I suspect that
if Western central banks are dumb enough to dump their entire 30k
metric tonnes of gold in the years ahead, the awakening Asian giant
will collectively swallow it all up without so much as a hiccup.

Asia is probably
the single biggest gold investment demand story in world history.
It should ultimately dwarf US equity and bond flight capital and
could very well lead to the biggest gold boom the world has ever
seen. The net impact on gold demand from half the world’s
population rapidly industrializing and building wealth cannot be
overestimated. It will probably ultimately blow away all of our
wildest expectations.

10. Technical
Proof.
The only sure way to understand true underlying supply and demand
fundamentals is to observe price action over a secular period, at
least several years. If global gold demand is really growing faster
than global gold supply, then the gold price has to rise.
There is simply no other economic alternative in a free market! And
make no mistake, the gold market is free until every single
buyer and seller on Earth can be physically coerced by a single
entity.

This chart shows
our awesome secular gold bull to date, the proof of the pudding.
For about six years now, a secular time span, gold demand has
exceeded gold supply driving up prices on balance. If it was the
other way around, if supply, including central bank selling,
exceeded demand, this would be a downward-sloping bear trend.

Gold has climbed
higher in US dollar terms for six years in a row now, with annual
percentage gains noted on the time axis. Bull to date the Ancient
Metal of Kings is up 182% as of this past May. Gold’s long-term
support lines have held rock solid for its entire bull, running
parallel with its strong upward-sloping 200-day moving average.
Gold has carved seven major higher interim highs and seven
major higher interim lows, an unmistakable secular-bull
fingerprint.

This gorgeous
secular gold bull
chart would never have happened if gold demand was not growing
faster than gold supply. Nor would it have happened if the periodic
central bank selling since 1999 was anything more than a temporary
nuisance. A multi-year secular trend is beyond argument, as it
reflects persistently bullish underlying supply and demand
fundamentals for gold.

Conclusion.
I hope these quick macro thoughts help clarify why gold remains
long-term bullish. While whole books could be penned on each of
these ten major reasons why gold fundamentals are so bullish, you
should at least have an idea of the general flavor of these logical
arguments now.

If gold is indeed
destined to thrive in the years ahead, then fortunes will be won
investing in gold and gold stocks. If you are interested in adding
new gold-related investment and speculation positions to your
portfolio during periodic gold weakness,
please subscribe
to our acclaimed
monthly newsletter today. At Zeal we have been trading this
gold bull since its very beginning and have been blessed with
outstanding realized profits.

If you have risk
capital you’d like to deploy into small gold explorers, we just
finished a comprehensive fundamental report on our 20 favorite
junior gold stocks. I suspect all of these tiny high-potential
companies profiled have a good probability of witnessing stock-price
gains running 10x or greater over the next several years. There
really are some incredible junior golds out there today, so please
buy our report now
before these dazzling opportunities pass you by.

The bottom line is
gold fundamentals remain very bullish today. Yes gold has been
running higher for about six years already, but these great bull
markets in commodities tend to run for seventeen years or so in
history. Thus we probably have about a decade left to run yet. And
since bulls tend to advance in a parabolic fashion, accelerating
during their later stages, odds are the best is yet to come.

And also realize
that the greatest growth in gold investment demand will probably
come not out of the US or Europe, but out of a
rapidly-industrializing Asia generating phenomenal amounts of
wealth. This is a global gold bull that is not dependent on
the falling US dollar, valuation mean-reverting US stock markets, or
central banks. Gold’s universal bull market far transcends these
provincial American concerns.